Tuesday, November 3, 2009

The Yankees and Taxing the Rich

I'm a big fan of political Catch-22s, and I think hatred of the Yankees' payroll is a big one.* For reference, the Yankees have had the highest yearly payroll in the game since 1996, and have been over $100M every year since 2001. They were the first team to crack $100M and $200M in yearly payroll. Generally, the angst over the Yankees payroll is overstated. Nine teams are over $100M in yearly payroll, and the two Los Angeles teams, two Chicago teams, the Mets, Boston and Detroit have been well up above $100M at various times. Anyway, there are many good defenses of the Yankees payroll, and that's not the point of this post.

*I'm from NY, but not a huge Yankees fan. I'm a Rockies fan. I'm only a Yankees fan in reflex to Boston fans, or those who rip on the Yankees for their payroll.

There are likely some conservative baseball fans who believe the Yankees' payroll is not good for baseball, but in general, it's hard to reconcile fiscally conservative principles with anti-Yankee payroll sentiment (operating within MLB is not the same as operating in a free market the parallel is not perfect). The major element of spending control in MLB are the luxury tax (in 2009, teams over $162M payed a 22.5-40% tax that was distributed to lower-revenue teams), and the most frequently proposed controls are a team salary cap and/or an individual salary cap.

Those are all forms of progressive taxation, and mostly don't mesh with fiscal conservatism. I'd guess that most people who advocate higher individual tax rates for the top income brackets or higher corporate tax rates would support the baseball luxury tax and would support a salary cap (not necessarily the other way around, since again, MLB is not a free market). The interesting thing is that in both of those cases, the total economic consequences end up hurting the interests that fiscal liberals want to help.

The ultimate result of higher individual income taxes is that high-income employees (who are generally the ones that set company rules and salaries) will freeze salary or limit raises for lower-income employees when their tax rates go up. This hugely affects minorities and young people, who depend on quick advancement through entry level jobs to higher salaries. The advancement may be there, but economic success will be limited. In sum, it will grow the wealth disparity in America.

The result of higher corporate taxes will be higher prices for American consumers, again disproportionately hurting low-income people. They depend on greater purchasing power to improve their standard of living. Price inflation decreases that purchasing power.

In baseball, the result of a salary cap would be more money for team owners and less money for players. With a 162 game schedule, there is a lot of tv, stadium and merchandise revenue in baseball to be spread around to players and owners alike. With a salary cap, owners wouldn't have to spend as much to put a team on the field. Necessarily, players' salaries would be depressed. There's not even a guarantee of parity in the standings. Higher revenue teams will still be able to spend more money on scouting and front office talent. That will create a gap in results that cannot be overcome by salary caps. Even if parity is achieved, fiscal liberals generally don't like putting more money in owners' hands and less in employees' (the players).

Interestingly, what fiscal liberals might hate about the Yankees' free spending, they love about the federal government. Just as the Yankees going 9 years without winning a World Series (and 6-8 other teams spending over $100M on payroll) demonstrates that spending does not equal success, fiscal liberals are quick to ignore the lesson that outrageous federal spending does not translate into a better American economy.